Correlation Between American Funds and James Balanced
Can any of the company-specific risk be diversified away by investing in both American Funds and James Balanced at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining American Funds and James Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Fundamental and James Balanced Golden, you can compare the effects of market volatilities on American Funds and James Balanced and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in American Funds with a short position of James Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and James Balanced.
Diversification Opportunities for American Funds and James Balanced
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and James is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and James Balanced Golden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James Balanced Golden and American Funds is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on American Funds Fundamental are associated (or correlated) with James Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James Balanced Golden has no effect on the direction of American Funds i.e., American Funds and James Balanced go up and down completely randomly.
Pair Corralation between American Funds and James Balanced
Assuming the 90 days horizon American Funds Fundamental is expected to generate 1.8 times more return on investment than James Balanced. However, American Funds is 1.8 times more volatile than James Balanced Golden. It trades about 0.12 of its potential returns per unit of risk. James Balanced Golden is currently generating about 0.11 per unit of risk. If you would invest 6,963 in American Funds Fundamental on September 12, 2024 and sell it today you would earn a total of 1,887 from holding American Funds Fundamental or generate 27.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Fundamental vs. James Balanced Golden
Performance |
| Timeline |
| American Funds Funda |
| James Balanced Golden |
American Funds and James Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and James Balanced
The main advantage of trading using opposite American Funds and James Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, James Balanced can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in James Balanced will offset losses from the drop in James Balanced's long position.| American Funds vs. James Balanced Golden | American Funds vs. Short Precious Metals | American Funds vs. Franklin Gold Precious | American Funds vs. Great West Goldman Sachs |
| James Balanced vs. Vanguard Wellesley Income | James Balanced vs. Blackrock Multi Asset Income | James Balanced vs. The Hartford Balanced | James Balanced vs. The Hartford Balanced |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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